Director Squires Issues Section 101-Focused Appeals Review Panel Decision

The newly confirmed Director of the U.S. Patent and Trademark Office (USPTO), John Squires, convened an Appeals Review Panel (ARP) to issue a decision that could signal a major softening of the USPTO’s Section 101 position on eligible inventions relating to artificial intelligence (AI) technologies. The September 26 decision in Ex parte Desjardins vacates a Patent Trial and Appeal Board (PTAB) panel’s decision to issue a new ground of rejection under Section 101 that had not been raised by the patent examiner. The decision instead found the claims to be directed to an eligible invention. However, it left undisturbed the panel’s prior art rejection under Section 103, stating that Sections 102, 103, and 112 are the traditional and appropriate tools to limit the scope of patent protection and should be the focus of patent examination.

What is the ARP?

The ARP is a panel of at least three members of the PTAB who review the Board’s decisions in ex parte, reexamination, and reissue appeals. The Director convenes the ARP sua sponte and does not accept or consider requests for ARP review. The members of the ARP are selected by the Director and, by default, consist of the Director, the Commissioner for Patents, and the Chief Judge of the PTAB. Decisions of the ARP are appealable to the U.S. Court of Appeals for the Federal Circuit.

The ARP’s decision

The PTAB panel’s decision had focused on an aspect of USPTO patent eligibility analysis known as Step 2A, Prong 2, where a claim reciting an abstract idea is evaluated to determine if it nevertheless recites a practical application of the abstract idea.

The panel below found no additional elements or combination of elements in the claims that may have integrated the abstract idea into a practical application. The ARP disagreed. Citing a foundational patent eligibility case for software-related inventions, Enfish v. Microsoft, the ARP reemphasized that claims directed to an improvement in the functioning of a computer or an improvement to another technology or technical field are patent eligible. Moreover, it noted that Enfish recognized that much of the advancements made in computer technology consist of improvements to software that may not be defined by physical features but rather by logical structures and processes. Turning to the specification of the application on appeal, the ARP found that it identified several technological improvements, including “effectively [learning] new tasks in succession whilst protecting knowledge about previous tasks,” “using less...storage capacity,” and “having reduced system complexity.” The ARP was persuaded that the claims were directed to an improvement to how the machine learning model at issue operates, and the decision thus found that the claims recited a practical application of the abstract idea and were therefore patent-eligible.

What the decision reveals

The decision is notable as a window into Director Squires’ views on Section 101 policy for AI inventions. The ARP found several faults with the panel’s decision, characterizing it as “overbroad” and “troubling.” It posited that under the panel’s reasoning, many AI innovations would be unpatentable because the panel essentially equated any machine learning with an unpatentable “algorithm” and the remaining additional elements as “generic computer components” without adequate explanation. Although it is nonprecedential, the ARP decision still advised examiners and PTAB panels not to evaluate claims at such high levels of generality. That the panel’s action was sua sponte was especially worrisome to the ARP, as it found that the panel made only a cursory analysis that ignored well-settled precedent. The ARP decision admonished future panels to treat such precedent with more care.

Takeaways for patent applicants

While this decision is nonprecedential, it signals a shift in Section 101 policy that will likely result in a decrease in Section 101 rejections. For those examiners and PTAB panels who issue such rejections, the decision indicates that they will need to be more specific in their Section 101 analyses, potentially by citing Enfish specifically. Regardless of the merits of this decision, it appears that the Director is sending a message — AI advancements are central to the U.S.’ national interests, and the USPTO should not arrest the development of those technologies through overly zealous applications of Section 101.

For applicants, the decision lends credence to the “wait and see” approach to patent prosecution during the Director transition. With the landscape at the USPTO now appearing to tilt in favor of software patents, applicants should consider the benefits of later examination after the Office promulgates new Section 101 guidance, which likely will issue sooner rather than later. Thus, for the time being, applicants may consider deferral mechanisms and reweigh the benefits of expeditated examination of software patents. Applicants may also file a notice of appeal to gain time while the USPTO works out its updated guidance and carefully consider moving forward with appeals of final Section 101 rejections that do not meet the heightened specificity requirements.

It remains to be seen how the Court of Appeals for the Federal Circuit will react to Section 101 policy changes at the USPTO, as the court is not bound by the Office’s internal guidance. While a softening of Section 101 standards at the USPTO may be good news for applicants in the short term, it could cause future enforcement challenges if issued patents do not meet the Federal Circuit’s stricter standards. Applicants should thus consider Federal Circuit caselaw in addition to USPTO guidance when drafting and prosecuting patent applications to ensure the strongest patents possible.